The Australian equities division of Queensland Investment Corporation (QIC) has begun building more risk into its products as it pursues more alpha, and has developed a ‘ghost’ portfolio tracking its analysts’ strongest convictions.
A restructuring of the investment team, process and product range was underway within the division, according to director Simon Hudson, resulting in an extension of analysts’ responsibilities and a general appetite for more risk. “QIC had a very traditional product structure, with a large part of its funds under management used in low-risk active funds. Now we’re evolving the product structure to develop multiple diversified alpha strategies across risk spectrums,” Hudson said. “There will be a range of diversified strategies going upwards in the risk spectrum.”
The division was considering commercialising a ‘ghost portfolio’ containing the stocks in which analysts held their highest convictions, after running it internally for the past year. While the portfolio would be overseen by Hudson, stock weightings would not be subjected fully to the judgement of a portfolio manager, he said. “The beauty of an analysts’ portfolio is that it runs off the grunt of the engine room of an organisation, not the portfolio manager.” The 12 member team consists of nine analysts-cum-portfolio managers, two dealers and Hudson. “We use our entire team and make them all decision makers.”
Hudson was also pushing for more of QIC’s Australian equities funds to be included in the Mercer surveys. To date, the manager’s active large companies fund, overseen by Paul Barnes, is the only product whose results are published by Mercer. “There’s a serious external credibility factor that surfaces once you enter the survey…it tests the resolve and convictions of the team. You’re only really battle-hardened once you enter the survey.”